updated 12:58 pm EDT, Sat March 30, 2013

Filing sees great risk in remaining public, including company breakup

In a preliminary proxy statement issued to shareholders on Friday, Dell warned that it would be a risky path for the company to take a lot of debt and remain public, assuming existing profit levels and market trends remain the same. The 274-page statement informs Dell shareholders of how the Silver Lake Partners deal was assembled, and why it feels the deal is the best of all the alternatives before the shareholders.

While the statement does not directly address the $15 per share Icahn deal, and the greater-than-$14.25 per share deal proposed from Blackstone, it does say that both deals involve the company taking on a significant amount of debt to remain public. Silver Lake, Michael Dell, and Microsoft's offer of $13.65 per share takes the company private. Under the terms of the deal, Michael Dell and his investment firm would own approximately 76 percent of the company, and Silver Lake would own the remaining 24 percent.

"Even when taking into account the certain value distributed to stockholders, (a leveraged recapitalization) would be unlikely to result in an aggregate value exceeding the $13.65 per share merger consideration and would present a number of risks and challenges," Dell said in the proxy statement.

The proxy statement sees layoffs and restructuring for the company if it remains private, and predicts adding a large number of sales personnel and increasing spending on development of new products and services. Michael Dell has publicly expressed concern that both the Blackstone and Icahn deal would break apart the company, to its detriment.

Details from the negotiations with Silver Lake were revealed as well. The investment firm raised its bid six times, increasing the offer by 20 percent since the commencement of negotiations.

Icahn has previously demanded Dell pay $15.7 billion in special dividends above the buyout price, or risk a proxy fight. Icahn's proposed dividend of $9 per share represents a 67 percent premium to existing shareholders above the current $13.65 offer on the table for the leveraged buyout proposed by Michael Dell, Microsoft, and investment company Silver Lake.

The existing privatization deal requires the majority of the shareholders (not including Michael Dell's shares) to vote in favor of the payout. Southeastern Asset Management, another vocal opponent of the buyout, would lose at least $825 million if the deal completes. Dell has dramatically cut its forecasts for 2013 operating profit by $700 million to $3 billion, casting further shadows over any deal.